How do secured loans get paid off when selling the asset?

I own a home in California (as tenants in common) with two siblings. My brother took out a loan using the house as collateral. When we sell the house, does the loan get repaid first, or do I get my 1/3 first?

For example, if he owes $150,000 and we can sell the house for 300,000. Do I get my $100,000 or does the bank get its $150,000 first?

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One Response to “How do secured loans get paid off when selling the asset?”

  1. The lending bank has a lien. If there are taxes owed, or any workers, say the guy that installed the $10K AC system recently, but never got paid, there can be other liens as well.

    If I were to buy that house, your bank and other lien holders would need to be paid off first to lift those liens to allow the title to transfer to me. You are a co-owner, and if you brother borrowed more that 1/3 of the value, you will come up short.

    Simple answer – lien holders (anyone owed money secured by the house) get paid before owners get their money. Sounds like there’s going to be less than $75K each for you and other sibling. Brother owes you some money.